Restoring Financial Gifts to Your Children

Life insurance can cover final expenses, or costs associated with your death—for example, funeral and burial arrangements, any potential legal expenses involved in settling your estate, and your debts. But life insurance can do much more. You can use life insurance to replace the income you would have provided if you’d lived as long as expected. That would mean the people who depend on you are protected from the financial hardship that could come from losing you. They can use that income replacement to pay for their living expenses, maintain their standard of living, and save for their goals. Life insurance can also help you while you’re alive.

For example, some policies have an account value, which you may borrow against—though you’ll probably be charged interest, and the death benefit will be reduced by the loan amount plus the interest. If you own your own business, life insurance can secure your company’s finances, and you can offer it as a benefit to attract employees. As part of an estate plan, life insurance can also play a big role. Some people use life insurance benefits to equalize an inheritance—for example, leaving a valuable asset to one child and a life insurance benefit of equal value to another. Your heirs can use life insurance to pay estate taxes that might be due when you die rather than having to sell off assets.

Life insurance can replace a charitable gift donated to a charity to maintain the estate’s value to its beneficiaries. Life insurance can be a gift in itself. There are a couple of ways to approach the gift of life insurance to a charity. You can donate the tax deductible the premium to the charity that owns the policy and is the beneficiary. You can also donate an existing life insurance policy to a charity, but the three year look back rule may apply of the death of the policy insured occurs, i.e. the policy is included in the estate. Both scenarios require financial justification to explain the economic loss to the charity if case of the death of the contributor. In general terms, most donors can establish financial justification with a history of contributions. Life insurance is a powerful estate-planning tool that can create options for the estate.

This press release contains content from Light Bulb Press with permission.